Repligen Corporation ($RGEN)

Good morning, everyone. Thanks for joining us for the Repligen management presentation. My name is Matt Larew, I cover Repligen here at Blair. Very pleased to be joined this morning by Olivier Loeillot who is the CEO of Repligen. Before we get to the presentation, 2 quick things. first, the Richardson room upstairs is where the breakout session will be. And second, for a complete list of research disclosures or potential conflicts of interest, please visit williamblair.com. Again, very pleased to have Repligen here today, and I'll turn it over to Olivier.

Thank you. Can you hear me okay? Good. Yes. Perfect. So I don't need this perfect. Very good SP-2 Well, welcome to the Repligen presentation. You got used to my French accent in the meantime. So that's great. You don't need a translator anymore. So we are going to go through a tech that's going to tell you about the beautiful story of our company and I think some of you -- most of you know the company already pretty well. But for those who don't know us, we are headquartered in Walsaachusetts. We are a pure bioprocessing play. Sometimes I hesitate a little bit when we say that because we do have a business on the analytical side. Yes. Yes, we do have a little play on the analytical side, but we are really a pure bioprocessing play about 2,000 people overall. And we've got, for the vast majority of our manufacturing of our product portfolio, we've got dual manufacturing siding. Last year, we did USD 738 million. This year, you know at midpoint of our guidance, we're going to be in the USD 800-plus million range this year. The word that you will hear me mentioning 20 times today probably is innovation. I mean, it's really our DNA. I mean we've been growing, thanks to our innovation. We are still very heavy on innovation and then we love what we have launched. We love what we're going to be launching over the next several years. So just a few key takeaways. I know sometimes you like takeaways at the end. I like them at the beginning so that at least you know what I'm going to be talking to you about today and what I really want you to remember innovation really what has given us the right to win and will give us a right to win over the next decade or so. But we have very diversified portfolio of product as well. I mean, I remember a year ago, I think I had to explain many of you and all of our analysts, we are just not only ATF and OPUS. Interestingly, ATF is probably the business has had the highest amount of headwind in the last 1 year, we've still been managing to grow 16% last year, and we're going to be outpacing market growth again this year. So we have a really very diversified portfolio of product also from a modality point of view, we are just not a new modality. I know last year, oh, you're just a numerate company, no, we're not. I mean -- and we had a big headwind on gene therapy, we still grew 16% last year. We've got a lot of levers to keep on outpacing industry growth. And I mean, even with some of the headwinds we have had, we're still outpacing industry. So can you imagine how much we would be if we wouldn't have at all of this headwind we just talked about. And I mean, just to mention a few of the reason why we can outpace really market growth first 1 is really like we are bringing breakthrough solutions. About 80% of our portfolio, we don't have competitors. So we are really creating new market segments that didn't exist before. I mean is a great example, but PAT is another great example where whatever happened with the market, we are still because we are creating just new market segments. And we have obviously a commercial clinical mix that is very different than the other guy. I mean where the other guys are typically on 75%, 80% of their sales going to commercial drug. It's only 40% of it going into commercial drug. Increasing. I mean, a year ago, it was about 75%, probably 3 years ago, it was about 30%. And as we are winning more and more design-in in commercial drugs both ATF, but more recently with protein as well, I would imagine that the share of commercial is going to keep on growing significantly over the next few years. And -- the last 1 I was mentioning is Asia. I mean -- we're a little bit subpar in Asia. I mean, we did about 17% of our sales in Asia last year. Most of our competitors are 20% plus. I mean, it's a great problem to have, probably for somebody like me because I spend a lot of my time in Asia in my career I know that region pretty well. So we are really doubling down in Asia right now to make sure we grow faster and with the right strategy in each of the country in Asia down there. Finally, we are obviously working on expanding margin. I mean you've heard us mentioning time we have to get fit for growth, and both are linked to each other and getting fit for growth for me is I make sure like we've got the right leadership. We have the right infrastructure, the right software, the right tool to be able to run a business that's going to be 1 billion in a few years from now and probably 3,000, 3,500 people or so on. So spend a lot of time on that, but we are making sure we combine it with improving our margin, which we have. I mean you've seen it last year, you've seen it very, very importantly in quarter 1. We are going to really make sure like we are balancing well, top line growth versus improving margin. I'm confident we can do both. I mean, which is why we've put in place that transformation office, and I'll talk to you a little bit about later on, where we really -- we know that's going to both accelerated top line growth, but at the same time, improve our margin further. And finally, we are really working on specific strategic priorities. I mean I already mentioned the transformation office -- we signed a very important OEM deal in China. I mean, about a year ago, I want to say started to tell some of you, I think the China market will start rebounding really, really fast. I mean it happened even faster than I would have thought, to be honest with you, but we will recognize this market is just completely now. And it was really very important for us to articulate a really good strategy down there. So moving to the next slide. Let's focus a little bit on these innovative technologies are giving us the right to win and defeat competition. So I won't go through the entire portfolio of products we have. But what you're going to see in the next couple of slides, we have a really broad portfolio of products. And when I joined the company about 3 years ago, I was delighted to see that because when I joined what HostiHealthcare Lifescience in 2010, my task was to build that to the offering that Cytiva has been really benefiting a lot in the past several years and so on. So we have already a very broad portfolio of products. I mean when I show you the workflow later on, I want to say that when you compare to the 4 big guys we have probably a broader portfolio than 2 of the 4 big guys. There are 2 and 1 of them is the 1 I'm coming from, where which has got more or less everything and another 1 probably that has got a little bit more than we do, but we have a really broad portfolio of products, meaning so the capabilities we have, the opportunities we have to grow absolutely massive by getting our product really embedded by big, big accounts. So without entering into too many detailed innovation, we talked about the breadth of the portfolio as well. The one I want to just mention here is really agility with care because the reason why big accounts love us and want to do more with than with the big guys is because we are more flexible, we're faster, we're obviously very innovative. And that is something we want to make sure we keep. So in our leadership meeting, we constantly remind ourselves, we are all coming from one of the 4 big for 1 reason, which is we don't want to do exactly the way they do business, meaning we want to stay flexible, agile, fast, customer focus and so on, and that's really something we're particularly focused on a daily basis. Last but not least, I mean everybody talks about digitization, we do it. I mean, we really -- it's not only worth. I mean we've got -- we're the only company that has gotten 5K technologies, and you've heard me -- some of you have heard me saying, I feel like we're almost like where Google was in 1985 or something like that, where -- we have the ability now to grab a lot of data from process development, from manufacturing. We just need now to convince customers to share those data with us and then give them further tool beyond just grabbing the data via PET technology digital twin and later on with AI software so that they can develop their processes much faster, but also they can run their manufacturing in a much more efficient manner. So think we are, by far, the leader in the field. We're really doubling down right now on PAT, so that our customers can collect the data. We are going to try to do our best to make sure we get access to those data as well, and then we can help our customers in their digitization journey. Growth. I mean, you all know we've been growing very nicely. So I know why 2019 to 2025, just because in between, there was a little even called COVID does that like screw up everything. So we cannot realize like instead of explaining without COVID with COVID, let's look at where we were before covered and where we are now because somehow the COVID noise is out now because there is no more COVID today, and there was not in 2019. So really had an 18% CAGR in the last 6 years. And what's probably more important is look at the right side of that slide where our total addressable market has grown tremendously the last several years. I mean, we have now about USD 13 billion of addressable market where the total market, I know there are a lot of numbers flowing around is probably around 22 million, 24 billion. So we've got a big, big into those markets and with our sales currently, we probably have about 5% market share. So as you can imagine, we've got massive opportunity to grow on that very big market here. So what about our broad Vera offering? I mean, this slide, I think, is important to show you what we've been achieving over the last 10 years. I mean, 10 years ago or so, our top 3 customers were two side of our business. So talking about what was a real risky business. I mean, look at where we were 10 years ago. I mean, last year, our top 10 only 1/3. And in fact, our bigger account last year was only 7% of our total sales. So we have a very diversified customer base, but probably even more important, look at the franchise column here, where just a protein business back 10 years ago. So -- and we say protein, it was not really protein. I mean we were just an OEM partner supplying Ligand the 2 big guys in the field, namely GE Healthcare Life Sciences called Cytiva and Millipore we've diversified that product portfolio completely over the last several years and look at where we are now where filtration last year was about 55% of our business, but we have 3 more businesses like chromatography protein and analytical that are doing very well, growing very, very strongly, particularly during the last several quarters. They've been like skyrocketing each of them and which is great because I would imagine that will balance our portfolio even more probably over the next 4 to 5 years. From a modality point of view, we are obviously pretty present on the new modality side. I mean, I would have thought we would be higher than 16%. I mean imagine we wouldn't have had all of the headwind we had on that side and a year ago, partly on that specific gene therapy program and so on. I mean everything was well aligned that Nemo above 20% for us probably in '25 and this year, for sure. I mean I'm still very bullish about it. I mean we just have and down a little bit more. I mean, but think about the fact most big pharma funnel today, more than 50% of their funnel is in new modalities. So it's just a question of time. I mean, whether it's euro whether it's a little bit longer, it's going to come back. We started to see some really positive signal on the gene therapy side. I mean you've probably seen like there was 2 FDA approval in quarter 1, but no later than yes, today the FDA has issued a guidance to potentially accelerate new -- sorry, gene therapy drug approval, which we hope is going to bring back a lot of optimism on that side. So you'll hear me talking about new modalities for the next several years because we're still absolutely convinced about it. Talking about the breadth of the portfolio, I mean, you've seen that one probably already. I mean, we are really, really broad. I mean, we've got 3 main gaps cell culture media, bioreactors and viral filters. We've got a plan more or less anything else and obviously want to keep on broadening that portfolio of products and looking at different opportunities, whether organic or inorganic to make sure we've got a bigger play across the board here. So we talked quite a bit about how we're going to outpace it a bit of a different set up here. So I want to start with the first column, which is really we are creating solutions. I mean when you compete with 4 big guys who are all like anywhere between 4x and 10x bigger than I mean you have to be differentiated. I mean you can't just come with me to products and so on, we will have 0 chance. I mean who have tried to do that, they are not particularly successful. So we're just trying to really make sure like we are creating new solutions, we are fixing problems for customers. ETF, again, is a perfect example, right now, I mean, everybody is looking at downstream continuous manufacturing, that's probably an area where we want to help customers in the future because that's really a new solution that everybody has been hoping to get something to deal with, which has never happened so far. Digitization is another great example, as I talked about earlier on. But at the same time, we're trying to increase our position. So let's talk about onshoring. I mean we do have a seat at the table. Now thanks to this portfolio, we've really broadened over the last several years. Now we have a seat at the table. I mean quarter of last year, we received several RFPs that we never ever received before. I mean we started to win some. I mean, the making takes time. I mean you all know that. That's a CapEx spending tap that we can't wait to see opening. But I mean we're starting winning. I mean, and the poly for us is actually massive. I mean I won't do the math that I've done. But for us, when you really take a haircut on what has been announced and so on and so on and our market share. I think we have $500 million hardware opportunity around the corner when I say around the corner for the next probably 3 to 5 years, which at our scale, it's a massive opportunity, obviously. And beyond that, obviously, we are trying to gain market share on the flat which we are, and we're trying to gain market share on free management where it has been more difficult, but we were doing everything possible to be successful here as well. And finally, we talked about clinical versus commercial. We talked about Asia as well. We've got something that I think nobody else has got, which is our key account management team, which is really built with people who have been in the industry for the last 20 years, 30 years, who know each of these customer personally multiple contacts and so on. This has been a great tailwind for us for the last several quarters and so on. And I think we're still at the beginning of the story. We said earlier, we are selling 2.5x more of our products today than were 5 years ago with those key accounts. I think on a scale from 1 to 10 with those big accounts, I think we're just between 2 and 3. So we've got a massive opportunity to further grow with those guys in the next several years here. So we talked about the 80% differentiated, so I won't repeat that again. Maybe there's a new product introduction, and that's a metric that we are tracking very specifically. And having been in that industry for the last 30 years, I can tell you were like far better than anybody else on that side, meaning last year, about 9% to 10% of our sales came from products we launched in the last 3 years. That's very unique. And I can guarantee you, I mean, we're spending about 65% of our sales in R&D every year. I mean, it's significant, much more than others, but considering the size of others, would imagine they should be able to generate much more innovation than they do. We're launching typically about 10 new products every year. I personally think it's almost too many. So we are trying to figuring out how maybe we reduce it a little bit so that our sales team can refocus on a smaller number, but that's a real track record for us here. So digitization, let's spend a few minutes here because that's really close to my heart. And I can bit to it already, but PAT, you're grabbing the information. But then you need to make sure you're integrating PAT in line with system that not only are grabbing the information at line because that line is great, but that line is not really helping you as much as in line. In line with enabling you to increase your yield tremendously because you know exactly when you're going to have to stop your batch, but also you avoid all of the risk of cross-contamination because you don't have to take sample every 5 hours. So combining PET technology with system is going to enable customers to be much more efficient. But indeed, the next step is really integrating digital twin capability like the Nova sign one, which we are including in the next TFF system we are launching at the end of this year, beginning of next year so that people can really understand their processes much better than they do right now. Then the future vision is AI. Obviously, I mean, we all hear about that on a daily basis. And formally, many people talk about it without what they're talking about. I can guarantee you this is going to happen. It's not going to happen next year, probably, it's probably going to be another couple of years before we are at the stage where we can see it with the open AI, the onshore pick of this world and telling them, hey, guys we company in bioprocessing to enable the biopharma industry to be more efficient. We need to partner together because we have access for our customers at least have access to the data we make sure now together, we can develop the tool that will enable them to be much more efficient. So it's on our radar screen. I think we are far ahead of anybody else. It's going to probably still take a couple of years, but we are very excited about that for sure. I think I mentioned that, so I'll skip it Asia as well. So let's maybe look at China because I think some of you heard me saying a year ago, I think China is going to start to rebound and look at where we are today. I mean it's -- if there is one thing that completely over the last 1 year, it's really China. And you've seen all of these licensing deals that are happening between the U.S. company and Chinese company just in the last 1 week. I mean, you got BMS first, I think E15 billion over the weekend, I think EUR 10 billion. I mean there's a total investment is massive. So what does it mean? It means 2 things. It means, first of all, like U.S. for starting to miss a little bit of innovation coming from the small biotechs that have a little bit of a headache getting funding in the last 3 to 5 years. beyond that, it means like China, which has to really switch from being a biolabiosimilar type of industry has become really 1 of the most innovative party on the antibody drug conjugate, but also on the bispecific antibody side, it means like this market is becoming now a real big engine of growth for bioprocessing company, which is why very focused on it. We just signed an OEM deal with a partner a few months ago. So we are working on several options to be able to regrab the growth that we think is going to come, and it's going to be massive over the next several years in that specific country here. The commercial mix, I think we talked about as well as the new modalities, so I'll keep this one. I think this 1 is a new one. And I mentioned a little bit of it already. We have a really very diversified portfolio of product. I mean think about it last year with the new modality headwind we had. And then with a few other stuff that happened, we still manage grow 16% and this year Q1 for me is a showcase. I mean and unfortunately, filtration was not doing as well as we would have hoped because 1 of a couple of our big accounts in forms like they were managing a little bit of their inventory this year. Look at the other guys, I mean, analytics grew more than 50%, in fact, in call 1. We say we're going to grow probably more than 20 in the full year, but we grew more than 50% organic, more than 40 in quarter 1. -- graph, it's about 4 or 5 quarters in a row, equiv been growing double digit, if not even above 20%. Protein, think about it like 2 years, 3 years ago, it was like the nightmare scenario where our 2 big OEM partners tell us, at the same time, we are not going to work with you anymore, not only we've managed to recover from it, but we are generating growth 15% growth, mid-teens growth in quarter 1 on a very tough comp because quarter 1 of last year was very high. So we have a really broad portfolio of products. I mean, if there is one key takeaway for you today is, imagine we wouldn't have the headwind we have right now. I mean growth would be absolutely massive. So that's really something I just want you to understand today. Capital equipment, obviously, something we are very, very focused on because we did have a pretty good year, partly during quarter 2, quarter 3 of last year and then we started to see a little bit of a slowdown. We are still doing okay because analytics is booming, but also our methanol vastinsteel mix or business has been benefiting from the very high growth, both in China and in India as well, but the rest has been definitely a little bit slower than we would have liked. That is a massive potential tailwind for the future. I mean you hear me about the number. Our funnel of OpenAI for hardware right now is more than 20% higher than a year ago. just waiting for customers to make decision. And once the tap is going to open, that's going to be, for sure, a massive open for all of us, by the way. I mean, I don't want you to see it's only represent only a few numbers of our company having those hardware to offer. I think it's going to become very soon a big seller market, and most companies are going to benefit from that very grandly here. So with this, are we confident that we can outpace market Absolutely. I mean think about it last year 16% organic noncoitrowth, we definitely outpaced market by more than 5 points last year. This year, obviously, with the headwind we have on gene therapy, we're going to be a little bit less than 5% at both markets, but we're absolutely very convinced we're going to be able to outpace in the near term, which is why we said we're going to double the size of the company in the next 2 years. And we are going to make sure, at the same time, we are improving margin as well, which is why we said we are going to target a 30% EBITDA margin by 2030 as well. So we're on the right pace. I mean here you've seen, I mean, a really great start of the year, a good year last year, a great start of the year. We also decided to put in place that transformation office not just to enable us to accelerate that EBITDA margin because it will, but it's not a primary target. The primary target was to make sure accelerate getting fit for growth, meaning improving the way we operate the company from every angle, IT, AI implementation, but also site consolidation and so on and so on. But with volume plus price plus the transformation of fees and we're absolutely extremely confident about our ability to move towards the 30% EBITDA margin. So just a couple, I think I mentioned quite a bit of that already on transformation office, IT. I did 1 thing may be because it's also helping us to accelerate further top line growth that transformation office. Think about it are still considered to be somewhat a bit of a newcomer, particularly for hardware. So the first is to make sure like once you start to get your wins and you deliver to those customers, you're not letting them I mean that's not the most important ever. Imagine you decide to switch your IT supplier at home and so on, your net supplier. And then suddenly, they let you down after a month, you're going to go back to the previous 1 right away. I think here that we are really focused on to make sure like we are supporting our customers pay from a service point of view. I mean I've mentioned when I joined the company 2.5 years ago, so it was taking us 4 months between the time we were delivering an equipment to a customer and we're installing it. Can you imagine buy a big piece of hardware at home and then your suppliers tell you in 4 months, you don't like that, right? So now we're down to 1.5 weeks. I mean that's just an example of getting fit for growth and making sure we bring the right level of service to our customers so that says they want to keep on doing more and more with us Sirirationalization, we have too many sites. I mean, for a company of our side, mean we've got manufacturing sites. I mean, so we are working every year on how do we consolidate that. So that -- and then what we've done is we have 8 to 10 of our sites that we know the site for the future and how any decision we're making of investment has to be on 1 of stand at the same time, we are trying to shut down the other 1 so that we've got a much lower number of sites in a few years from now on. Okay. So I'm just looking at time, so delivering on strategic priorities. So we've delivered last year across the board. And I was really happy, obviously, above market growth, 16% organic non-COVID about the non-COVID. I got that question several times. The reason why we are the only 1 probably that still had to talk about non-COVID last year is because we had a restatement in 2024, where there was a big chunk of sales happening on COVID. That's the only reason why I promise you, well, I can't promise you because maybe COVID comes by. But I hope we don't have to mention COVID anymore in the future. Anyway, expand margin, expanded operating margin by 90 basis points. I mean, in fact, it was 240 basis points organically, but we really -- what we reported out was 90 because of the acquisition of -- we continue to innovate. I mean, we had several very important launches last year, but in solo BP plus. I mean just spending maybe a minute on that. Well, when I joined the company and having been in a different world before, I couldn't believe like we ever launch a second version of any hardware we launched in the last 10, 15 years. I mean, there is just a huge opportunity for replacement upgrade market for any hardware you're selling on the market. And partly, when you've got installed build like Solo, where you've got more than 2,500 units and same with a little sister, which is our small-scale TFF. I mean the first thing I told the team, we really have to develop new version of our installed base, look at one of the reasons why we had this huge tailwind, and it's just at the beginning of it with the CTec business is because we are generating that replacement upgrade market that is coming on top of the organic growth type of business. We are doing the same. We're going to launch a small version, small TFF version of a similar installed base of several thousands of units beginning of next year, that should be a huge tailwind for filtration next year. M&A, very important. I mean, the last acquisation was a year ago, we've been really upgrading very much the way of working of that team. I'll be honest with you shop. So they needed to get really fit for growth, probably much more than we do ourselves. So we spend a lot of time on that. We have improved the funnel tremendously, and we think that's going to be a very nice big growth of only for us over the next 5 to 10 years here. And finally, again, is higher. I mean you hear me talking about people. I mean, when you look at the organization we have today. I mean, we have an incredibly strong team of leaders. I mean with all the credit, I give to Tony for what he has built on an incredible franchise, we really needed to move from a couple of people making decision for the entire company to have now a team of people that is really capable to absorb and empower their own team to move faster and so on because that's going to be absolutely critical for us over the next 5 to 10 years when we become multi-billion company. And this year, they are pretty much the same, to be honest. I mean if you think about it, the above-market growth is still obviously line of sight for us. We are focusing on Tartan on APAC as well. I mean I talk a lot about China, but a country like Korea for us is a massive opportunity. I mean, we've done really good job over the last couple of years to get traction at some of the big actors in that region as well. Expand margin, we are accelerating it right now and we the transformation office, we said we probably can accelerate by 100 basis points as early as next year, which we're very happy about. R&D, we have multiple launch happening this year. I mean, parting on the protein side, I mean, we don't talk too much about it because probably takes a little bit more time. But when I look at between the catalog product we've launched and the multiple custom projects we are working on very often for what are commercial drugs that have been on the market for several years using resin that were not productive enough and so on. I mean it's going to be a bit lumpy in the next couple of years, but we've got massive opening coming out of that over the next several years. system, we are still developing a lot of new features. We just launched a new version of RS10at high pressure, which has got a lot of traction, and we are going to add some more PET technologies on each of our systems over the next couple of years. M&A remains we are top priority #1 in terms of capital allocation. I mean I get the question asked very often here, what about buying some of your share back so we still believe at this stage, we can do much better with our money, which is why we're still looking at a lot of opportunities on that side. Finally, still very focused on getting it further fit for growth. This year, our most biggest area of focus is really on the IT side. I think that's it. 17 seconds, not too bad, right? Maybe some time for you still? Yes.

Yes. Thanks very much, Olivier. Maybe I'll just ask 1 question before we go if that's okay, which is you talked on the quarter 1 call about pickup of orders in March that went into April. I feel like maybe there was some confusion at a recent investor conference. So just curious, because if you could talk about maybe the strength into the second quarter and your perspective on how the business is going.

Yes. No, thanks for the question, Matt. I mean, as you know, we typically don't talk too much about the current quarter, but I think for one, I'll make an exception here. But maybe let me take a quick step back for us. We had a massive order intake in quarter 4. And when I say massive, unfortunly, I make a lot of bad decisions sometime I decided to stop talking about orders in quarter 3, we had the highest order ever in the company in quarter 4, which is why we entered into 2026 very strong manner. What was somewhat a little bit disappointed in the first 6 weeks of '26 were a little bit slower. So wonder why probably because quarter 4 was so strong. But then we started to see a really nice acceleration in the second half of quarter 1 and ongoing very strongly so far in quarter 2. So we are really very confident. I mean if the fact we delivered a midpoint of our guidance in Q1. We already said we are absolutely very confident we're going to be at least at the midpoint of our guidance in Q2 as well. we're probably 1 of the very few that is in that situation right now. I mean if you look at many others, I mean they have to see a real acceleration between quarter 1 and the rest of the year or even first half and the second half. I mean, for us, I mean, we wouldn't need to see any improvement of the current situation to be able to deliver midpoint. I mean, in fact, we would see -- we will need to see degrade issue to be at the lower end of our bracket. So from that point of view, we are pretty confident about the year.

All right. message received. Thanks very much, everyone, for joining us, Olivier. Thank you very much. And for those on to join us is in the Richardson room upstairs. Thank you.

Thank you.